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hackingbear writes "Workers at Taiwanese electronic outsourcing manufacturer Foxconn are getting a pay raise after a series of 13 suicides, including three in three consecutive days. According to an article by state-run newspaper China Daily, Apple concluded that the main cause of the suicides is low wages. (The media has also attributed the suicides to a variety of other factors — everything from the semi-military style of management, to long overtime, to China's one-child policy, and Foxconn paying too much compensation to the family of suicide workers, thereby encouraging copycat suicides.) Apple plans to subsidize raises using its own products (Google translation; Chinese original here) — the first one being the iPad. This would raise the outsourcing cost from 2.3% to 3% of the iPad's sales price. The article does not say the amount of the raise per worker, but it is rumored to be about 20%, according to other Chinese news sources."

I got curious as to how Foxconn's suicide rate compared to other groups. The United States' suicide rate [wikipedia.org] is 11.1 per 100,000 people. Foxconn employs somewhere around 800,000 people [economist.com](!) which means by the end of the year, you'd expect a death count by suicide of around 90 people.

If the current rates holds, there'll be 50 more Foxconn employees alive at year's end than there will be Americans from a comparably sized city.

Here OP, let me make an analogy to explain why Apple is not entirely responsible, only partially, for Foxconn.

Why should we let the OP (or any other poster) abdicate responsibility for their supply chain? If OP chooses to work with a grocery store, then OP is on the hook for ensuring the grocery store is a reputable and humane supplier.

Or is it okay to let a poster like OP accrue the benefits of outsourcing (i.e. not having to have a farm or barter with farmers directly) while ignoring negative consequences (i.e. environmental damage, inhumane working conditions, etc.)?

See how silly that sounds? Now, in reality responsibility scales proportionally to percentage of gross sales you make up for your supplier. OP to his grocery is a many to one relationship, giving him little responsibility. Apple to Foxconn is a few to one relationship, giving apple more, but not total responsibility. However, when a supplier has only one customer, that customer has total responsibility.

Because despite the fact that FoxConn make stuff for all sorts of people in the consumer electronics world, all the bile and invective seems to fall on Apple's shoulders.

No doubt, Apple actually trying to help will be seen negatively too - let's see if any of the subsequent comments say so (my money's on yes...). Honestly, the anyone-but-apple brigade make the fanboys look calm, collected, and sane.

Simon

In Finland, all these Foxconn suicides have been reported as happening at a "Nokia contractor", no word of Apple in any of the news posts.

None of them give a shit. Slavery was always the goal. We outlawed it in the US.. but not overseas.

The US Workers who demanded a modest life style, home and health care... were sold out by those companies who would rather employ slaves, then Americans because its more profitable and slaves are easy to abuse.

More like the corporations are hostage to their financial performance and stock price. Who holds them hostage? The retirement plans with billions invested and expect their 10 -15% ROI. The beneficiaries of those plans? Grandmom and Granddad who retire comfortably at 55, 60, 62... You can't demand exceptional financial results from companies and corporations and handcuff their options to deliver those results. It's called Capitalism - the only incentive that gets people to produce more time and again is personal financial gain.

There's no question that Apple products carry a higher average price than similar products at other companies, but it's absurd hyperbole to claim 2-3x higher, especially based on gross margin. The logic fails entirely since all of this data is part of their corporate financial reports:

Probably because Apple products are 2-3x more expensive than those of their competitors.

That would imply that, given other manufacturers having a profit margin of 1%, that Apple would have a gross profit margin of 51 to 68%. Given another manufacturer's more realistic gross margin of 25%, that would mean that Apple's profit margin would be 63%-75%. That is of course not the case.

Apple's gross margin is closer to 40% (which is indeed higher than most competitors), which means that assuming identical production costs and business costs, Apple's prices are about 15% higher as an absolute cap.

But gross margin isn't net profit, and it's net profits that are the subject of so much jealousy--gross profit less overhead, in other words. Apple does a lot of its engineering work in house (hiring an OEM to make something you designed is much cheaper than buying something someone else designed from that OEM), and a simple walk through their SEC-reported financials reveals that they also have lower per capita business costs than Dell or Acer, which amounts to a price savings--we'll say it's in the 5% ballpark (though in reality, it's probably a bit more).

That makes for an 'Apple tax' of at most 10% in shelf price--hardly "2-3x" and similar to the higher-margin premium lines at HP and Dell that subsidize their unnaturally discounted rock-bottom lines.

It's well-known that Apple's profit margins are extremely high compared to their competitors,

Even if it were double the gross margin of their large competitors (and the difference isn't that large), it would amount to a price difference of ~25%, about one-quarter to one-eighth your claim.

In other words, if a product costs Dell $100 to make and grosses 25%, with $13 overhead, net profit is $12 of the $125 sales price. The same product costs Apple $98 to make and grosses 40%, with $10 overhead, making net profits $29 of the $137 sales price. The consumer pays just about 9% more at the store (nowhere near double), but Apple ends up with more than double the profit in dollars.

from your viewpoint this seems like an easy and wonderful conclusion. From here, well, think about what the article summary said: Some of the suicides were possibly "copycat suicides" because of the large compensation packages for bereaved family. Now, think about the Honda workers down in Guang Zhou who are on a walkout (no strikes allowed here) for a raise. Now, they have seen that for the relatively cost of a few suicides they can get the raise they are desperate for. Yes, I am saying that it is highly likely that this will inspire a rash of suicides among the grossly underpaid Chinese workforce. Think, minimum wage is 750 RMB (110 US) here outside of Shanghai. Oh, silly me, that is per month. It is not even close to living wage, much less something you could take into a marriage negotiation. Double that is a good factory job, still not enough to buy an apartment (and thereby become a legal resident of the city where you are working) or a car or anything that is considered success here. But another 20%? maybe things become more possible then, at least to consider getting married to someone who makes what you do. See the result, if i commit suicide i can help all my friends, if i don't we all suffer and fail. what would you do?

Peter Hessler covers this very well in Country Driving [amazon.com]. Young migrant workers flock from the poor inland regions to the coasts looking for factory work. They want to work as much overtime as possible 1) because they want to earn as much money as possible as quickly as possible, and 2) because they are far from home and aren't interested in spending time or money on leisure (their "real lives" are back home, and they've come out solely to work).

Because of this, jobs offering more working hours and less vacation are desirable from the workers' point of view.

You can argue that this situation is problematic; it exists because wages are too low and there's an oversupply of labor; without these issues, individual workers would have more leverage to secure a decent living wage without having to work ridiculous hours. But given the current reality, the fact is that massive overtime is not only common, it's sought after.